Causal relationship between stock prices and gold rate: empirical evidence from India

Dheyvendhren Bhuvaneshwari and Krishnaraj Ramya

Afro-Asian Journal of Finance and Accounting, 2017, vol. 7, issue 4, 305-316

Abstract: The paper investigates the cointegrating and causal relationship between stock prices and gold rates in India. The monthly time series data of stock prices of S%P CNX Nifty and gold rates for the period 2011:01 to 2015:12 are used as the sample data for this study. In this research paper, Augmented Dickey-Fuller and Phillips-Perron unit root tests are applied to test the stationarity of data. Johansen's cointegration test and Granger causality test are adopted to examine the cointegrating and causal relationship respectively between stock prices and gold rate. From the analysis, non-existence of longrun equilibrium and absence of causal relationship are found between the two variables. Further, it is inferred that stock prices do not influence gold rate and therefore past values of stock prices cannot be used to improve the forecast of future gold rate in India.

Keywords: Indian stock prices; gold rate; unit root tests; Johansen cointegration test; Granger causality test. (search for similar items in EconPapers)
Date: 2017
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